Why Health Care Will Change: How purchasers will manage health care clinical/financial risk to disrupt institutionalized excesses Brian Klepper, PhD Chief

Why Health Care Will Change:

How purchasers will manage health care clinical/financial risk to disrupt institutionalized excesses

Brian Klepper, PhD Chief Executive Officer

National Business Coalition on Health

© National Business Coalition on HealthPage 2

We Spend Double


How Much Health Care Cost Is Waste?

PwC 2008* – 54.5%

In 2014 dollars, >$1.5 trillion annually

9% of GDP

US’ 2012 Budget Deficit

* The Price of Excess

http://www.pwc.com/us/en/healthcare/publications/the-price-of-excess.jhtml


Physicians and vendors AMA RVS Update Committee

Health plans Primary care payment that encourages specialty referral Paying for services at multiples of market rates Control and non-management of high cost acute and chronic patients Open, performance-neutral networks

Health systems Overtreatment Excessive chargemaster unit pricing

EHR vendors Barriers to seamless exchange of health care information

Institutionalized Mechanisms of Excess


AMA Relative Value Scale Update Committee (RUC)

31 physicians - 26 specialists & 5 PCPs

CMS’ sole advisors on medical services valuation

Secret proceedings, sham survey methods, composition unrepresentative of physicians in market, financially conflicted

CMS has historically accepted 90% of recommendations

Commercial health plans typically follow Medicare’s payment lead


Real World Impacts of RUC Influence

1. Over-values specialty services while under-valuing primary care

2. Inhibits primary care’s moderating influence and accountability function over specialty services

3. Creates systemic incentives to perform more services, and more expensive services (specialists “practicing to the codes”)

4. Payment disparities between PCPs and specialists; crisis-level primary care shortage


Increasing Primary Care Referrals To Specialists

Typical 2012 established primary care office visit duration = 7.5-12 minutes, 30 years ago, it was 20-25

PCPs paid by visit, so may refer time-consuming problems

Most specialists profit from diagnostics, procedures

Result: Huge increases in specialty visits, output diagnostics, procedures


The Challenge For All Health Care Purchasers

Identifying and buying health care value

Driving appropriate care Disrupting inappropriate care Reasonable (market-based) unit pricing

HOW BAD IS IT?


American Health Care Cost Is Absorbing Nearly ALL Economic Growth

In the decade preceding 2009, 79% of all household income growth was siphoned off by health care.

Source: Auerbach DI and Kellermann AL, “A Decade of Health Care Cost Growth Has Wiped Out Real Income Gains for an Average U.S. Family,” Health Affairs, 30:9, 9/2011.

http://content.healthaffairs.org/content/30/9/1630

http://content.healthaffairs.org/content/30/9/1630


Health Care’s Growing Burden on Federal Budget Crowds Out Other Needs

Source: White House Council of Economic Advisors


US Health Care Unit Pricing Is Much Higher


And Lucrative Pricing Drives Higher Utilization


Global Competitiveness

US businesses operating in international markets must overcome a 9+% health care cost disadvantage just to be on a level playing field with their competitors in other developed nations (e.g., Australia, Korea, Germany)


Structural Drivers of Excess Risk

Fee for service reimbursement

Lack of quality, safety & cost transparency

Subjugation of primary care


Sources of Excess Supply

Overtreatment

Egregious unit pricing

Conventional steerage

Lack of care coordination


Incentives – Why Direct (Market-Based) Contracting by Purchasers?

Everyone in health care (except primary care) is typically incentivized to want health care to cost more

Margins are a percentage of total

Support for the status quo

Market-Based Management of Clinical & Financial Risk


Market-Based Reforms

Over the past 20 years, employers (and health plans) have, without much impact:

Significantly increased co-pays for “steerage” Introduced generic drugs and mail-order Introduced wellness, disease management, lifestyle coaching

programs Introduced incentives Renegotiated network discounts Given employees “more skin in the game”


Market-Based Reforms

But we haven’t managed the care process,

like businesses would.


Management of Full Continuum Health Care Risk

OccupationalHealth

Convenience/Urgent Care

Primary Care Medical Home

+

+

Rx Dispensary& Mgmt

Chronic Disease& Lifestyle Mgmt

Referral Mgmt

+ +

Benefit Refinement

Utilization Review

Case Management

Carrots & Sticks

Stop-Loss Arrangements

TelemedicineHealth IT

Direct Contracting

High PerformingNarrow Networks

Centers ofExcellence


High Performance Vendors - Characteristics

Often mission-driven Outside “conventional health care” High subject matter expertise in niche Receptive to alternative reimbursement Willing to go at financial risk for performance Evidence-based Data driven Drive appropriateness, disrupt inappropriateness


Questions

1. Causality narrative: What do you do that is structurally different and that allows you to get a better result in your niche?

2. Longitudinal data demonstrating better health outcomes and/or lower cost

3. Client testimonials affirming performance + attesting to execution

4. Willingness to go at financial risk for performance


High Value Risk Solutions

Three Examples:

Integrated Mechanical Care (IMC)

Employers Choice Rx (ECRx)

Colo-Guard


1. Integrated Mechanical Care, Tallahassee, FL

Musculoskeletal management (17%-30% total spend)

Built on mechanical diagnosis and therapy (MDT)

Significantly enhanced industrial platform for scale• Advanced clinical guidelines• Rigorous training to performance standard• Quality management• Clinical decision support• Integration with clinical documentation platforms

Can intervene in approximately 80% of cases


1. Integrated Mechanical Care, Tallahassee, FL

Case rates of $175 for triage, $775 for management

Significantly better functional health outcomes

Half the recovery times

50%-60% the cost for net savings of 10+% off total health care spend

Significant drop in volume/intensity of recidivism events

Major Clients > 3 Years – Capitol Heath Plan, General Dynamics, Michelin North America


2. Employers’ Choice Rx – Ft. Smith, AK

Coalition-mounted PBM in collaboration with PBM consultant (Rx Results, Little Rock)

Four major design elements1. Rewrote contractual language2. Collaborated with UArk Pharm School on true evidence-

based formulary; drug mfg-sponsored studies given lower weight; focus on independent studies; better drug mix at lower cost; disrupted mfg-controlled formularies

3. Contract with major PBM for admin/ancillary programs to get scale

4. Narrow pharmacy network – Ousted CVS & Walgreens in exchange for $5/script reduction


2. Employers Choice Rx

Results show consistent 35%-40% savings over conventional PBMs, with strong testimonials

PBM is 10%-12% of total spend for 3.5%-4.0% potential savings


3. Exact Sciences Colo-Guard

Home molecular diagnostic testAs sensitive as colonoscopy w/lower false

positive ratesApproved by FDA and CMS. FDA panel approval

10-0Retail: $550 vs colonoscopy about $2,000Marketed through primary care


Direct Contracting Opportunities

Cardio-metabolic management Musculoskeletal management Oncology management Pharmacy benefit management Infusion Dialysis Ambulatory surgery High performance networks Centers of excellence


Policy-Based Approaches That Could Lower Risk

Risk-based reimbursement –provides a discipline that encourages careful management of care and cost

Transparency efforts – market context and decision support on cost/safety/quality

Infrastructure – EHRs that seamlessly exchange patient information. (e.g., Direct Trust); can’t manage risk without everyone working from the same data

http://www.directtrust.org/

http://www.directtrust.org/


Approach – Purchaser Strategies/Tactics For Leverage

Gain business/union leaders’ buy-in and $$ support Convey gravity of health cost problem for their organizations and the US

Through coalitions, deliver measurable savings/value Ancillary risk management carve outs: advanced imaging,

musculoskeletal mgmt., oncology mgmt., ambulatory surgery, etc.

Leverage collective strength to drive value In markets, make visible purchasing decisions that favor excellent

performance In policy, become a counterweight to the health industry’s influence Promote approaches (e.g., risk-based reimbursement) that favor

accountable care


Brian R. Klepper, PhDis a health care analyst and commentator. He is CEO of the National Business Coalition on Health, a national collaborative driving improved health care value, representing 52 regional business health coalitions, 4,500 businesses, unions and local governments, and about 35 million people. He is also a Principal in WeCare TLC, LLC, a worksite primary care clinic and medical management firm based Orlando.

An active author and speaker, Dr. Klepper has provided health care commentary to CBS Evening News, the Wall Street Journal, The New York Times, and the Washington Post. He has published articles in Kaiser Health News, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally.

Brian is a columnist on Business of Medicine and Primary Care for Medscape, the most-read medical site. He is a regular contributor to The Health Care Blog, The Doctor Weighs In, The Health Affairs Blog, Kevin MD, Health Care Policy and Marketplace Review and other expert health care blogs.

Brian served on the American Academy of Family Physicians’ Primary Care Services Valuation Task Force, and is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He is an Advisor to the Lundberg Institute and the Patient-Centered Primary Care Collaborative, which advocates for medical homes.

In his spare time, he is an offshore sailor.

904.343.2921, [email protected]

http://www.nbch.org/

http://www.wecaretlc.com/

http://www.medscape.com/

http://www.thehealthcareblog.com/

http://www.thedoctorweighsin.com/

http://www.healthaffairs.org/blog



http://www.kevinmd.com/

http://www.healthcarepolicyandmarket.blogspot.com/

http://www.aafp.org/online/en/home/publications/news/news-now/practice-professional-issues/20110720pcvaluetaskforce.html

http://www.healthaffairs.org/

http://journals.lww.com/ambulatorycaremanagement/pages/default.aspx

http://www.lundberginstitute.org/

http://www.pcpcc.net/leadership

mailto:[email protected]

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Why Health Care Will Change: How purchasers will manage health care clinical/financial risk to disrupt institutionalized excesses Brian Klepper, PhD Chief